Net profit fell to $78
million, or 17 cents per share, in the six months ended Dec.
31, from $84 million, or 21 cents, a year earlier, the
Wellington-based company said in a statement. First NZ
Capital was predicting a profit of $80.5 million. Earnings
before interest, tax, depreciation and amortisation sipped
0.6 percent to $329 million on a 1.9 percent increase in
revenue to $535 million.

The company dropped its interim
dividend and plans to cut costs in operations and capital
projects from July in preparation for Commerce
Commission-enforced price cuts from December this year.

Auditor KPMG tagged Chorus’s accounts without
qualifying its opinion, saying “significant uncertainties
exist in relation to future regulatory, legal and political
outcomes that may impact on the assessment of the carrying
value of Chorus’ assets.”

“We are getting on with
managing our costs and revenues without reliance on any
regulatory outcomes,” chief executive Mark Ratcliffe said.
“The reality of our situation is that like all of the
telecommunications industry we are adapting our business to
significantly lower revenues.”

Last year the Commerce
Commission proposed cutting the network operator’s pricing
on its copper line services, which Chorus says has left a $1
billion hole in the funding to finance roll out of the
government-sponsored ultrafast broadband network.

Chorus
is in negotiations with Crown Fibre Holdings over building
the network, but Communications Minister Amy Adams has
indicated the government expects the company to fill most of
the $1 billion funding hole it says has opened because of
the impact of price cuts on its cash flow.

Ratcliffe said
the company has discussed a number of potential initiatives
with Crown Fibre Holdings, and hopes to announce the end to
the first tranche of measures shortly.

Chorus’s annual
earnings will likely be at the top of its previous guidance
range of flat to a low single digit decline in EBITDA, the
company said.

The company kept its capital spending guidance of
between $660 million and $690 million this year, though
increased forecast capex on fibre by $20 million to between
$550 million and $570 million due to higher than budgeted
demand and an increase in fully-funded school connection
work.

The company passed 46,000 premises in its UFB build
in the six-month period and is targeting a cost of $3,100
per premise for the 2014 financial year before any
‘pain’ or ‘gain’ share with service companies.

Chorus had total fixed line connections of 1.78 million
as at Dec. 31 from 1.79 million a year earlier. Connections
on baseband copper fell to 1.5 million from 1.56 million a
year earlier, while unbundled copper local loop rose to
125,000 from 109,000 and naked basic/enhanced unbundled
bitstream access (UBA)/naked Very-high-bit-rate digital
subscriber line (VDSL) rose to 103,000 from 72,000. Fibre
connections climbed to 27,000 from 15,000 a year earlier.

Total broadband connections rose to 1.13 million as at
Dec. 31 from 1.08 million a year earlier. Basic UBA
connections fell to 246,000 from 474,000, with enhanced UBA
gained to 747,000 from 530,000, and naked enhanced UBA up to
87,000 from 60,500. VDSL connections were 20,000 and fibre
connections were 16,000 from negligible numbers a year
earlier.

The shares rose 1.1 percent to $1.435 on Friday,
and have more than halved since the Commerce Commission
first flagged steep price cuts were likely in December 2012.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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